Big Food Corporations Are Making The World Fat

NESTLE, THE WORLD’S biggest food company, has creative ways to
reach far-flung corners of the world. One of them is to work
through people like Flavia Medeiros, a microdistributor in São
Paulo. She sells to Brazilians who might not at first sight have
the cash or inclination to buy Nestlé products. Ms Medeiros’s
stockroom is packed high with Nestlé cereals, yogurts, candies,
chocolate milk and infant formula. Her local recruits sell
products door-to-door, often with IOUs provided by the company.
In a sister programme the company has a large boat gliding up and
down the Amazon, selling packaged food and ice cream to the
people living along its banks. Nestlé is thinking about kitting
out a second boat. Such sales techniques make some health
advocates apoplectic.

For food and drinks companies, rising obesity rates present a
conundrum. Companies have a duty to their shareholders to make
money. All big food companies are working hard to sell more
products to more of the world. Many unhealthy products are very
profitable. But companies do not want to be vilified for helping
to make people fatter. The spectre of government regulation looms
large. Many firms are now conflicted, continuing to hawk
unhealthy products yet also touting elaborate plans to improve
nutrition. They insist they will help lower obesity rates, not
raise them, but there is room for doubt.

Over the past decade sales of packaged foods around the world
have jumped by 92%, to $2.2 trillion this year, estimates
Euromonitor, a research outfit. In Brazil, China and Russia sales
are three to four times their level in 2002. Many food companies
offer both indulgent products and healthy ones such as Nestlé’s
Greek yogurts.

Soft drinks are another matter. Coca-Cola and PepsiCo control nearly 40% of the world’s
fizzy-drinks market between them (see chart 4). Sales of soft
drinks across the world have more than doubled in the past
decade, to $532 billion; in India, Brazil and China sales of
fizzy drinks have more than quadrupled. This is troubling, given
that sugary drinks accounted for at least 20% of America’s weight
gain between 1977 and 2007, according to Gail Woodward-Lopez and
her colleagues at the University of California, Berkeley.

These impressive sales figures look set to rise further. Nestlé
is buying local companies in China and adapting its own portfolio
for the Chinese market. Many Chinese find coffee too bitter for
their liking, so Nestlé is offering Smoovlatte, a coffee drink
that tastes like melted ice cream. Kraft, a food mammoth, split itself in two in
October. Mondelez International, the new company that now makes
the hallowed Oreo biscuit, is pushing for global domination of
the snack market. It plans to increase its investment in emerging
markets, which already account for 44% of its revenue.

Fast-food chains, too, have spread far into developing markets.
McDonald’s is now in 119 countries (see box at the end of this
section). Yum! Brands, owner of KFC, Taco Bell and Pizza Hut, derives 60% of its profit
from the developing world, and there is plenty of growth
potential left. Yum!’s chief executive, David Novak, explains
that the company has 58 restaurants for every 1m Americans,
compared with just two restaurants for every 1m people in
emerging markets.

But even as they are expanding, food companies are keen to show
that they take the obesity problem seriously. The International
Food and Beverage Alliance (IFBA), a trade group of ten giants
including Coca-Cola, Mondelez and Nestlé, has given global
promises to make healthier products, advertise food responsibly
and promote exercise. More specific pledges are being made in
rich countries, where obesity rates are higher and scrutiny is
more thorough. In England 21 companies have struck a
"Responsibility Deal" with the Department of Health which commits
them to helping people consume fewer calories. In America, the
biggest and most closely watched market, 16 companies have
promised to cut 1.5 trillion calories from their offerings by
2015 (an amount based on a rough calculation of how much the
average American should cut from his or her diet to be healthy).
And virtually every company has a plan of its own to improve
nutrition, some more robust than others.

There are three general approaches: cut out bad ingredients, add
good ones or introduce new products. Kraft says it has come up
with 5,000 healthier products since 2005, either by improving the
recipe for those already on the market or launching new ones.
Coca-Cola has reduced the average number of calories in its
drinks by 9% since 2000 and continues to study new types of
low-calorie sweeteners in addition to those it is already using.
Jonathan Blum, who was appointed Yum! Brands’ chief nutrition
officer in March, says he is systematically reviewing the
company’s restaurant offerings for what he calls its three
pillars: choice, transparency and nutritional content. Nestlé, in
particular, wants to be seen as a company that makes healthy
food. "It is a core business strategy," explains Janet Voûte,
Nestlé’s global head of public affairs, who used to work at the
WHO. The company has set up a new institute to combine
nutritional and biomedical research, in the hope of creating
foods that provide a medicinal benefit. Nestlé is examining its
entire portfolio to make sure its products are healthier and
tastier than those of its direct competitors.

The effort to offer healthier products is constrained by two main
factors. First, there is little agreement on how to define
healthy and junky food respectively. A carrot is clearly healthy
and a sweet fizzy drink is not, but the distinction is not always
as obvious as that. A company may reduce the sugar content of a
biscuit, but that does not make it healthy. A hamburger may be
"energy dense", as nutritionists put it, with a lot of calories
packed in, but it has some nutritional value. Even a deep-fried
Oreo, a cannonball of fat and sugar, will not doom the consumer
to obesity if eaten only occasionally.

The uncertainty over which foods are healthy and which are junky
makes it difficult to gauge how much progress the industry has
achieved. Nestlé has a detailed "nutritional profiling" system to
determine whether a product is an appropriate part of a healthy
diet, and boasts that 74% of its offerings meet the test. A small
Kit-Kat chocolate bar qualifies.

Make me virtuous, but not yet

The food industry’s second problem is one of timing. Public
companies may say they want to offer healthier foods in the long
term, but they have a responsibility to their shareholders to
boost profits in the short term. Even as companies develop
nutritious products, they will keep marketing fizzy drinks and
crisps until consumers stop buying them. Sales of
"better-for-you" products--which Euromonitor defines as foods
that have been tweaked to contain less sugar, fat or salt than
similar products--have more than doubled in the past decade. Even
so, they accounted for just 7% of drink and packaged-food sales
last year. Yum!’s Mr Blum cautions against making too many
changes too quickly. "This is not a sprint," he says. "Consumers
say they want to eat healthy, but their behaviour tends to be
slightly different." He adds: "We have pride in fried, we’re a
fan of the pan."

PepsiCo has seen the industry’s most tumultuous experiment.
Indra Nooyi, who became chief of the
fizzy-drinks-and-crisps company in 2006, set out to sell
healthier products. She hired Derek Yach, who had worked on
tobacco and diet at the WHO, and set bold targets to reduce salt,
saturated fat and added sugar in the company’s products. In 2010
PepsiCo declined to advertise its sugary drinks during America’s
Super Bowl, launching a marketing
campaign for social causes instead. Shareholders began to revolt.
They wanted PepsiCo to give its full support to money-making
products, healthy or not.

So Ms Nooyi has had to backtrack. In February PepsiCo will not
just advertise at the Super Bowl; it is sponsoring the Super Bowl
half-time show. Appearing on CNBC, an American business network, in
September, Ms Nooyi cast herself as a football enthusiast. "You
can’t watch a game in a mancave without doing Doritos, Pepsi and
Lay’s," she said.

Dr Yach left PepsiCo in October to lead a new think-tank at the
Vitality Group, which runs health-incentive programmes. Speaking
a few weeks after his departure, he said that both investors and
health advocates will have to show more patience. For decades
food research centred on taste, not nutrition, so "we’re talking
about pretty radical changes." For investments in healthy foods
to succeed, executives need to give them ample time and marketing
support.

Some want to see quicker progress and stronger regulation. Kelly
Brownell of Yale University reckons that food companies
will continue to push junky foods. They are under pressure to
sell as much food as possible, and Yale’s research shows that
children are more likely to gorge on sugary foods than on
wholesome ones. Marion Nestle of New York University (no connection with Nestlé)
thinks that food companies will not change unless governments
require them to. "Their hands are tied. They can only do this in
a very limited way because of concern over short-term shareholder
value." Dr Brownell argues that the food industry has followed
the script of the tobacco companies, emphasising personal
responsibility and funding health research. So far, promises to
make products healthier and limit advertising have helped fend
off legislation, but not everyone is happy about that. "No place
in the world have we had self-regulation shown to be successful
at solving the issue," says Barry Popkin of the University of
North Carolina.

Boyd Swinburn of Melbourne’s Deakin University is particularly
troubled by the prominent role that food companies are playing in
shaping politicians’ plans for fighting obesity. Several
government agencies in America were mulling voluntary guidelines
to limit marketing of unhealthy foods to children, but strong
lobbying has caused the idea to stall. Food companies are among
those that present their views to the WHO, which advises
countries on nutrition and food policy, through the WHO’s "public
dialogue" process. For example, companies encouraged the WHO to
present a menu of possible policies on food marketing, rather
than a single prescription. Food companies have also given money
to the WHO’s American branch, which unlike its equivalents in
other parts of the world has no rules against such donations.

This makes some at the WHO’s Geneva headquarters shudder. But
Nestlé’s Ms Voûte thinks most food companies are acting
appropriately. Health advocates want diets to change and big
companies can help. "We do respect that there are areas where
there are conflicts of interest," she says, "but there are also
areas where there is a convergence of interest." In April Nestlé
and the International Diabetes Federation (IDF) announced they
would co-operate on diabetes education and prevention. "This
approach is a recipe for more business as usual, more obesity and
more diabetes," trumpeted Dr Swinburn and 14 other leading
academics in the Lancet, a British medical journal. "It’s not
tobacco," retorts Ann Keeling of the IDF. "This is something we
did with a lot of consideration."

The big question for the food industry is whether it can continue
to make money even as it cuts calories. The first progress report
on the food firms’ pledge to remove 1.5 trillion calories from
America’s diet is due next year. The evaluator, appointed by an
independent foundation, is Dr Popkin. He will judge which
products have been made healthier, by how much, and whether
consumers have simply switched from the more nutritious products
to less healthy ones. But "their definition of healthy is not my
definition of healthy," he says.

Dr Popkin is also concerned that the industry may change its
practices in rich countries but not in poorer ones. Diet sodas
make up 22% of Coca-Cola’s sales by volume in Europe and nearly
one-third in North America but just 6% in Latin America. Another
report due next year may shed some light on this. The Wellcome
Trust and the Gates Foundation are sponsoring a study of food
companies’ role in fighting over- and undernutrition in both rich
and poor countries. If the companies turn out to have been slow
to act, governments will have all the more incentive to take
matters into their own hands.

Even as companies develop nutritious products, they will
keep marketing fizzy drinks and crisps until consumers stop
buying them.